The following article was submitted to the Chronicle-Herald on 5 January 2005. The article was never published.

Who runs Nova Scotia?

Nova Scotia Power's announcement in mid-December that it would 'substantially' reduce its proposed rate increase from an average of 12.4 percent to 7.3 percent was greeted with surprise by most Nova Scotians.

This reaction was understandable, given that NSPI had spent much of 2004 preparing for this rate submission, using their new "positive energy" approach of "working more closely with our customers and key stakeholders" (as described in their 2003 Annual Report). During the early part of 2004, NSPI held 'technical conferences' with its customers and stakeholders. NSPI initially proposed an average increase of 8.6 percent in May, increasing it to 12.4 percent in June after the Federal tax ruling was announced. The proposed increases were explained and justified with detailed calculations and projections. Throughout the UARB hearings held in the autumn, NSPI stuck to their proposed increases, despite serious objections from many interveners; yet in the space of just over two weeks in late November and early December, NSPI backed down, offering an average rate increase of 7.3 percent.

Which raises the question: if NSPI is willing to accept an average increase of 7.3 percent, why didn't they approach the UARB with this request in the first place?

To answer this question, it is necessary to consider what took place in December 2001, when NSPI last filed for a rate increase, asking for an average increase of 8.9 percent. Following months of bitter wrangling between NSPI and a variety of interveners, as well as the public criticism of a number of NSPI and Emera executives for failing to attend the hearings, the UARB granted NSPI a three percent increase in October 2002.

Clearly, NSPI has learned a great deal from their last rate hearing. They have employed the age-old negotiating tactic of asking for an inflated amount, and then, after extracting concessions, appear magnanimous by agreeing to a lower amount. As a result, NSPI has skillfully obtained a rate increase with which both they and their shareholders will be pleased.

Shortly after NSPI's announcement, Premier Hamm was taking credit for NSPI's apparent change of heart, first telling reporters that he was "was concerned about what was going to happen to major employers"; then proclaiming that his government "Didn't hitch our wagon to the power corporation. We hitched our wagon with the people and the industries of Nova Scotia". Such a claim rings hollow, given that residential customers (the people of Nova Scotia?) are facing an 8.7 percent rate increase (the maximum possible in the proposed settlement) and the only concession granted by NSPI is a token inverted block rate.

By claiming to have stood up to NSPI, the Hamm government is cynically masking its relationship with NSPI. Ever since the release of the provincial Energy Strategy in 2001, the Hamm government has gone out of its way to help NSPI; for example, the new Electricity Act makes NSPI compliant with U.S. FERC (Federal Energy Regulatory Commission) rules, thereby allowing it to sell electricity to the United States.

In the government's letter of support for NSPI's new rate structures, Energy minister Cecil Clarke wrote that "the Province is demonstrating its commitment to the settlement process ... and is simply extending implementation of the 2005 SO2 [sulphur dioxide] reduction by two months". It is unclear how the Premier can claim that his government, "Didn't hitch our wagon to the power corporation" when his Energy minister has made concessions to NSPI over Nova Scotia's air quality regulations that were to have come into effect on 1 January 2005.

Although the Hamm government has seemingly 'done a deal' with NSPI, the UARB could demonstrate its independence and issue its own decision on NSPI's original submission. Whether or not it does will go a long way in determining who runs Nova Scotia.